UBS’s Julian Emanuel and team look at where earnings stood at the end of the day yesterday:

Companies (ex-Financials) have missed on earnings estimates by 0.2% (incl. Financials beat by 2.8%). 48% have beaten EPS vs. an average of 71% since the recovery began (2Q09). Ex-Financials, consensus earnings growth is expected to increase by 2.6%. Companies (ex-Financials) have surprised on revenues by 0.7% (incl. Financials beat by 0.8%). 61% have exceeded revenue forecasts vs. an average of 50% during the recovery. Ex-Financials, consensus revenue growth is expected to increase by 1.6%.

Strategas Research Partners’ Nicholas Bohnsack and Ryan Grabinskiworry that forecasts are too high:

The problem with lofty profit expectations is: 1) they rarely come to fruition; and, 2), the potential for this cycle seems predicated on increased corporate spending – read: higher near-term costs. We remain more modest in our estimates of both the level of, and growth in, profits. The market is using a lofty $120 for S&P 500 EPS in 2014.

Marketfield’s Michael Shaoul and team think the market can brush off the misses:

[We] are still in the early stages of the earnings season, and there is
plenty of opportunity for disappointment ahead, but the general tendency of this market is to take bad news as isolated examples of corporate difficulty rather than to view it as a harbinger of a general decline in conditions, another example of how sentiment has become much more resilient in recent months. This does not render the market immune to correction, but it does raise the bar as to what would constitute a sufficient shock to force the market to change course to a meaningful degree.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.